This leaves SB 4 as the only bill regulating fracking that is still in play for this legislative session.  SB 4 passed on the Senate floor before the end of May deadline for making it out of the house of origin and moved on to the Assembly.  As discussed in more detail in the blog post on May 31, 2013, like AB 7, SB 4 would require a fracking-specific permit, notice to property owners, and disclosures relating to fracking fluids.  Also noted in that post, the author of SB 4 indicated that the bill would be amended to remove the moratorium on fracking activities in California.

Co-authored by Michael N. Mills and Robin B. Seifried.

As it goes to the Assembly, SB 4 would require operators to obtain permits specifically allowing fracking activities.  These permits must be provided to other property owners as a form of advance notice.  SB 4 would also require the operator, after completing fracking operations, to post on a publicly accessible website information relating to the volume and contents of the fracking fluid used, but would allow fracking fluid suppliers to claim trade secret protection for the chemical composition of the fluid additives.  See the May 2, 2013, post for more information on SB 4.

Also still in play, AB 7 made it to the floor but was pulled for further amendment and sent back to the Natural Resources Committee.  Because it was amended on the floor, AB 7 is not subject to the May 31 deadline and may still make it out of Assembly.  As amended, AB 7, like SB 4, would require a permit to perform fracking activities.  AB 7 would also require proof that the regional water quality control board (RWQCB) approves of the disposal method and location of wastewater associated with the operations.  Also like SB 4, AB 7 would require the operator to provide a copy of the approved permit to surface property owners and to disclose the chemicals and volumes of water used in its operations subject to trade secret protection as claimed by the fracking fluid supplier.  

With the removal of the fracking moratorium provision, SB 4 is the most likely of the surviving bills to pass the California legislature.  SB 4 may compete with the similar AB 7, if it ultimately passes the Assembly, which would also require approval of fracking activities and disclosure of the volume and contents of chemicals used in fracking fluids.  Both bills provide for trade secret protection.

In addition to the fracking moratorium bills, several other bills relating to fracking failed to make it out of their house of origin before the deadline.  After the Senate Appropriations Committee passed SB 395, it was moved to the inactive file and thus did not make it to the Senate floor.  SB 395 would have removed the exemption from hazardous waste regulations for water produced by fracking operations (see May 2, 2013, post).  In the Assembly, AB 288 failed on the floor.   However, AB 288, which would have originally required a permit specific to fracking (see April 17, 2013, blog post), was essentially gutted by amendment before reaching the floor and ultimately would have had little effect on fracking operations.

Relating to water quality, AB 669 and AB 982, also failed to advance. AB 669, which would have required RWQCB approval of the proposed disposal of fracking wastewater, failed on the Assembly floor. However, this provision was added to AB 7.  AB 982, requiring RWQCB approval of a groundwater monitoring plan, was held in Appropriations.

Co-authored by Michael N. Mills and Robin B. Seifried.

If SB 4 passes in the Senate, it will compete with three Assembly bills proposing fracking moratoriums. The Assembly Committee on Natural Resources also advanced those three bills this week (see May 1, 2013, post). SB 4 is the least restrictive of the proposed bills, allowing fracking activities to continue at least until 2015, while the Assembly bills would each prohibit fracking immediately.

Each of the three bills would restrict fracking activities pending a determination of whether and under what conditions fracking may be conducted without risk to human health or the environment.  Two of the bills, AB 1301 and AB 1323, would prohibit fracking anywhere in the state.  The third bill, AB 649, would only prohibit fracking, as well as the use of clean freshwater for fracking purposes, within a yet to be determined distance of an aquifer. 

Other than the scope of the prohibition on fracking, the requirements of AB 649 and AB 1323 are the same.  Before the prohibited fracking activities could recommence, the bills would require an advisory committee, convened by the Secretary of the Natural Resources Agency and the Secretary for Environmental Protection, to develop a report addressing potential health and environmental impacts of fracking, potential economic impacts of increased enhanced oil and gas recovery, potential effects on communities, a review of existing regulations and determination of whether they are adequate, and recommendations for emergency planning and regulations to address issues identified.  The bills would require completion of the final report by January 1, 2018, and a determination of whether and under what conditions fracking may be conducted by January 1, 2019.  However, the prohibition on fracking imposed by these bills would go into effect immediately.

AB 1301, in contrast to the other two bills, would prohibit fracking in the state until the Legislature, as opposed to the agencies, determines whether and under what conditions fracking may be conducted without risk to human health or the environment.  AB 1301 is otherwise less detailed than AB 649 and 1323.  AB 1301 does not indicate how and on what timeline the Legislature should determine whether and under what conditions fracking activities may recommence.

Under any of the three proposed bills, a fracking moratorium, at least within some distance of an aquifer, would be certain and the timeline for lifting that moratorium would likely be on a scale of years.  If either AB 649 or AB 1323 are enacted as currently written, the best case scenario for lifting an imposed moratorium on fracking is probably January 1, 2019.  Although it is possible that a determination regarding whether and under what conditions fracking may be conducted could occur before that deadline, that is unlikely, and it is more likely that the agencies would fail to meet that deadline and fracking activities would be further delayed.  If AB 1301 is enacted, without a given timeline and without any detail regarding how the Legislature is to make a determination regarding the impacts of fracking, the results are even less certain. 

The Assembly bills proposing a moratorium on fracking would have an effect on fracking operations sooner than their counterpart in the Senate.  In contrast, the Senate bill, SB 4, would allow fracking activities until January 1, 2015, and would only prohibit fracking after that date if a study on its impacts is not completed (see April 11, 2013, post).

Co-authored by Michael N. Mills and Robin B. Seifried.

In the first suit, the court held that BLM violated the National Environmental Policy Act (NEPA) by unreasonably relying on what the court found was an outdated resource management plan and environmental impact statement that lead to the assumption that only one exploratory well would be drilled on the approximately 2,700 acres of leased land. The court concluded that advances in fracking technology have since significantly increased the number of wells that were likely to be drilled in the area and that BLM should have re-evaluated the potential impact of fracking resulting from issuing oil and gas leases for those lands.

The environmental groups argue in the second suit that BLM again failed to consider current information regarding the potential impacts of fracking. In this latest suit, BLM assumed only one well would be drilled on the nearly 18,000 acres of leased lands.  Give the larger area at issue in the second suit, it is likely that the court will again side with the plaintiffs and find that BLM's NEPA analysis failed to fully consider the potential impact of fracking.

Co-authored by Michael N. Mills and Robin B. Seifried.

As discussed in further detail in the blog post on April 11, 2013, AB 288 and AB 7 would respectively require an operator to obtain a permit specifically allowing well stimulation activities, including fracking, and to disclose the chemicals and volumes of water used in its operations.  AB 669 would also require an operator, before commencing fracking activities, to obtain approval of its wastewater disposal method and location from the regional water board.

This vote moves the bills one step closer to the Governor’s desk, where the decision as to whether California should more stringently regulate fracking will ultimately be decided.

Co-authored by Michael N. Mills and Robin B. Seifried.

The report identifies the major risk drivers as fracking wastewater storage and handling, wastewater disposal by injection, and potential groundwater contamination associated with failed well integrity.  While acknowledging the discussion draft rules issued by the Department of Conservation, Division of Oil, Gas, and Geothermal Resources (see December 19, 2013, post), the report concludes that further regulation is required to adequately address those risks.  In particular, the report recommends at least 30-day notice to regulators and the community before commencing fracking operations, while DOGGR’s discussion draft requires only 10-day notice.  The report also recommends requiring well operators to disclose to DOGGR all chemicals in fracking fluids, including those that would be subject to trade secret protection under DOGGR’s discussion draft.  Further, the report recommends more stringent well integrity testing prior to fracking activities and increased pressure monitoring during fracking operations.

Most of the recommendations in the report have already been addressed to some extent by one of the several bills before the California Legislature this session (AB 7, AB 288, AB 982, SB 4, SB 395); however, the report also introduces some new concepts relating to the disposal of fracking wastewater.  In particular, the report recommends requiring unique tracer chemicals in fracking wastewater to track direct impacts to groundwater and surface water resources.  The report also recommends requiring operators to maximize the recycling and reuse of flowback and produced water and prohibiting the discharge of any fracking wastewater to publicly owned treatment works.

In addition to more stringent reporting, monitoring and wastewater management requirements, the report recommends further study of the impacts of fracking, funded by an increase in DOGGR’s fees.  The study would include an examination of the potential seismic impacts, despite DOGGR’s position that induced seismicity is not associated with fracking operations.  The report also identifies other issues outside the scope of the report, such as an increased demand for water used in fracking, greenhouse gas and other air emissions, land use impacts and other potential public health impacts to workers and communities.

UC Berkeley’s report will likely be cited as support for one or more of the bills pending in the California Legislature that would require more stringent regulation of fracking operations than that proposed in the draft DOGGR regulations.  Also, DOGGR may incorporate some of the report’s recommendations when it issues a proposed rule and initiates the formal rulemaking process.  Even if the recommendations in the report do not make it into DOGGR’s proposed rule, the report will certainly be cited by commenters in support of more stringent regulation in the rulemaking process and could thus find their way into DOGGR’s final rule.  In any case, it is quite possible that at least some of the recommendations in the report will become legal mandates in the very near future.

Co-authored by Michael N. Mills and Robin B. Seifried.

In contrast, Assembly Member Wieckowski amended AB 7 to (1) allow for trade secret protection of information relating to disclosure of fracking operations and (2) exclude the mandate to Department of Conservation’s Oil, Gas & Geothermal Resources (DOGGR) to implement fracking regulations by 2014.  AB 7 would still require operators to disclose the chemicals and volumes of water used in their fracking activities.  See the blog post on December 9, 2012, for further details on AB 7 as originally introduced.

Also this week, Senator Pavley's amended SB 4 passed the Senate Natural Resources and Water Committee.  The amended bill would require a permit specific to fracking and notification to affected property owners.  The bill would also mandate a study on the impact of fracking before 2015 and prohibit the issuance of any permits from that time until the study is completed.  See the blog post on March 28, 2013, for further details on SB 4.  Lawmakers supporting the bill indicate that it would fill some of the gaps they see in the DOGGR's draft fracking regulations.  See the blog post on December 19, 2012, for further details on DOGGR's discussion draft of its fracking rules.

Co-authored by Michael N. Mills and Robin B. Seifried.

The court disagreed with BLM's analysis, finding that BLM failed to consider the impact of current fracking technology on the availability of oil from the Monterey Shale.  By relying on the 2006 plan, based on outdated technologies, the court concluded that BLM failed to take into account the "reasonably foreseeable" possibility that current technologies would lead to significantly increased oil production in the area of the leases.  Based on the current scale of fracking, BLM should have performed further environmental analysis to determined the "new and significant environmental impacts" associated with granting the leases. 

The court agreed with BLM that the impacts of fracking are largely unknown; however, it also found that this was "precisely why proper investigation was so crucial in this case."  But the court refused to issue a remedy at this stage, ordering the parties to submit a joint recommendation.  If the parties cannot reach agreement on a proposed remedy, each will argue their respective position for a final decision on the remedy.

The judge emphasized that the decision was not a determination regarding the environmental impacts of fracking, only that BLM failed to adequately consider such impacts under NEPA.  Nonetheless, this case does suggest that recent developments in fracking technologies have resulted in unknown and potentially significant adverse impacts to the environment.  This will certainly prompt increased environmental analyses of the impacts of fracking in the context of other federal, state and local authorizations and increase the time and administrative costs of obtaining such studies and approvals.

Co-authored by Michael N. Mills and Robin B. Seifried.

The rule will be implemented in two steps, the first of which is the notification and reporting requirements.  At least 24 hours before commencing drilling, well completion or rework activities, the rule requires operators to submit written notification to SCAQMD that specifies the location of the well, the type of activity that will be performed, and the distance, up to 1,500 feet, from the well to the nearest "sensitive receptor".  Sensitive receptors include residences, educational facilities, daycare centers and health care facilities.  SCAQMD will post this information on its website within 24 hours of its receipt. 

The rule also requires operators and suppliers of chemicals used to report to SCAQMD information relating to air emissions and chemical use.  Within 60 days of completing drilling, well completion or rework activities, the operator must report information relating to combustion equipment and fugitive dust emissions and the volume, management and chemical ingredients of fluids used in the operations.  Suppliers of chemicals for drilling, well completion or rework activities are also required to report the chemicals that are delivered to oil and gas well operators.  SCAQMD will post the information provided for the chemicals used at each well on its website, excluding certain details relating to chemicals for which suppliers claim trade secret protection.  For chemicals identified as trade secrets, SCAQMD will post only the chemical family (or similar descriptor) and identify whether the chemical is an air toxic.      

The purpose of the first step of the rule is to gather information on emissions and chemical use relating to fracking and other production stimulation activities.  No later than two years after implementation of the first step, the second step of the rule will be a report evaluating the information collected and potentially recommending further regulation.  Although the first step of the rule does not at this time restrict fracking activities, it does impose additional administrative requirements and could likely lead to future regulation including emission control requirements and fluid ingredient, volume and management limitations for fracking and other production stimulation activities.

Co-authored by Michael N. Mills and Robin B. Seifried.

Like the prior version of the bill (see March 8, 2013 post), the amended bill would continue to define “produced water” broadly (any fluid that is emitted from an oil or gas production well), and could be interpreted to include even natural groundwater brought up during oil and gas operations.  Under the amended bill, this definition would mean that the injection of any water brought up during oil and gas operations would be subject to UIC regulation.  The amended bill would also shift the prior focus from regulating fracking wastewater as hazardous waste to regulating fracking wastewater disposal.  Specifically, it would prohibit the injection of any wastewater containing hazardous waste. 

Co-authored by Michael N. Mills and Robin B. Seifried.

After the amendments, SB 4 would require the Natural Resources Agency to complete a study on the impact of fracking before 2015.  If the study is not completed and peer reviewed by that time, the bill would prohibit the Department of Conservation’s Oil, Gas & Geothermal Resources (DOGGR) from issuing any permits allowing fracking beginning January 1, 2015, until the study completed and peer reviewed.  Also, despite DOGGR’s assertions that induced seismicity is not a concern associated with fracking, the study would include an examination of the potential seismic effects. 

The amended bill would also require operators to obtain a permit specifically allowing fracking activities, which the operator would need to provide to certain surface property owners at least 30 days before commencing fracking operations.  The application for the permit would require an estimate of the amount of water to be used in the proposed fracking activities, the source of that water, and the estimated length, height and direction of the fractures.  DOGGR would be responsible for determining whether the proposed fracking activities present an “unreasonable risk.”

SB 4 as amended is not the first bill proposed in the California Legislature to require a permit specific to fracking activities.  AB 288, introduced in the Assembly in February (see March 8, 2013, post), would also require a fracking-specific permit.  These bills contrast with DOGGR’s current discussion draft of regulations governing fracking activities (see December 19, 2012, post), which would not require fracking-specific approval.

However, the amendments to SB 4 introduce the first potential moratorium on fracking activities in the state since the California Legislature tabled an Assembly bill last summer that would have barred fracking activities pending state regulations (see August 17, 2012, post).  SB 4, on the other hand, would only prohibit the issuance of fracking permits if the study on its impacts is not completed and peer reviewed before 2015.  Nonetheless, it is likely that the study and the peer review process would not be completed before the 2015 deadline and the fracking moratorium would go into effect until such time as that work is completed.

Co-authored by Michael N. Mills and Robin B. Seifried.

The Decker court was asked to consider whether forest roads associated with logging activities are “industrial facilities” for the purposes of storm water regulation under the Act. The CWA requires a discharge permit for discharges of stormwater from sites associated with industrial activity, including immediate access roads, and the question presented to the Court was whether the discharges from logging roads fit within EPA’s definition of “stormwater discharges associated with industrial activities” at 40 C.F.R. 122.26(b)(14).

EPA argued that its definition with respect to timber activities was limited to “traditional industrial sources such as sawmills” and was not intended to extend more generally to timber harvesting or to associated logging roads. The Court concluded that EPA’s interpretation was permissible, and accordingly deferred to EPA.

The Court also pointed out that one reason why EPA’s interpretation of its own regulations should be granted deference is that the State of Oregon has made extensive efforts to develop a comprehensive set of best practices to manage storm water runoff from logging roads. Whether the same argument can be made for roads in oil and gas extraction fields raises a question of fact that requires a case by case analysis.

Stoel Rives LLP represented several timber industry clients, including the Oregon Forest Industries Council, through the district court and Ninth Circuit proceedings, and helped prepare the petition for Supreme Court review.

The other two bills were introduced in the Assembly and relate to DOGGR’s approval of well drilling activities.  On February 11, 2013, Assembly Member Marc Levine introduced AB 288 to require fracking-specific approval.  Under the current law, DOGGR grants general approval to drill an oil and gas well, but specific, additional approval is not required for fracking activities.  The bill would prohibit fracking without such approval and eliminate the automatic “10-day deemed approved” permitting scheme under current law that operates if DOGGR does not respond to a permit application during an initial 10-day period after a permit application is submitted.  The bill would also authorize DOGGR to establish a fee for the costs of regulating fracking.  This contrasts with DOGGR’s current discussion draft rule, which would not require specific approval for fracking.

On February 22, 2013, Assembly Member Das Williams introduced AB 982 to require an agency-approved groundwater monitoring plan for fracking operations.  The bill would require an operator to submit such a plan to DOGGR, as well as the Regional Water Quality Control Board, for review and approval together with any notice of intent to drill, rework or deepen a well that also included fracking activity.  The plan would include a characterization of groundwater quality in the zone of influence of the well, information relating to constituents in the fracking fluid, a plan for monitoring to detect contamination during and after the fracking activities, and an emergency monitoring plan in the event of a well casing failure or other similar event.  These monitoring requirements are similar to those imposed under DOGGR’s current discussion draft rule; however, DOGGR’s rule requires monitoring of the integrity of the well while AB 982 focuses more on measuring direct impacts to the groundwater aquifer.  Also, like the bill introduced in the Senate, this bill would directly involve yet another agency, the Regional Water Quality Control Board, in fracking activities.

Co-authored by Michael N. Mills and Robin B. Seifried.

The second workshop will be on March 13 at the Four Points Sheraton on Bakersfield.  See DOGGR's website for additional information.

Lawmakers asked the agencies to address potential impacts of fracking relating to seismic activity, soil contamination, and drinking water quality.  In response, the agencies indicated that they do not believe fracking poses significant risk to the environmental or public health.  Other key questions raised focused on the timeline for notification of planned fracking activities to surrounding property owners and the disclosure of the ingredients in fracking fluids.  Participants also questioned whether regulatory agencies had enough qualified personnel on staff to conduct critical inspections and enforce the regulations. 

DOGGR’s regulations are still moving through the rule-making process.  The first public workshop was held in Los Angeles on February 19.  See DOGGR’s website for information on dates, time and locations for additional workshops in Bakersfield and Sacramento.

Co-authored by Michael N. Mills and Robin B. Seifried.

DOGGR emphasized in its announcement that the discussion draft regulations are not yet a part of a formal rulemaking process.  Rather, DOGGR intends the discussion draft as a starting point for these discussions with stakeholders before it commences formal rulemaking.

Co-authored by Michael N. Mills and Robin B. Seifried.

In the complaint filed yesterday, the Center alleges that DOGGR’s issuance of permits for well operations that include fracking violates the state’s Underground Injection Control (UIC) program and Public Resources Code.  The Center argues that fracking operations constitute “underground injection” activities regulated by the UIC program and therefore DOGGR must monitor and supervise such activities.  Further, the Center argues that DOGGR, in issuing these permits without investigation and subsequent monitoring or supervision, has failed to take appropriate measures to prevent damage to life, health, property and natural resources as required under the Public Resources Code.  The Center seeks a declaration that DOGGR’s ongoing failure to regulate fracking under the UIC program and to prevent damage to public resources violates state laws, as well as an injunction prohibiting DOGGR from continuing to issue permits for oil and gas well operations that include fracking.

Although the 2005 Energy Policy Act made most forms of fracking exempt from the federal UIC program under the Safe Drinking Water Act, the Center bases its allegations on the assertion that California did not adopt into the state UIC program the amended definition of “underground injection” that excludes fracking.  Nonetheless, the federal program only requires that the implementing states develop a program that is at least as stringent as the federal program, which would allow DOGGR to also exclude fracking from its UIC program.  Previously DOGGR’s position was that the Safe Drinking Water Act fracking exemption also applied to its UIC program and that fracking was “well treatment,” not subject to UIC regulation, rather than “underground injection” as the Center now alleges.  However, DOGGR announced at the end of 2012, in response to an EPA review of its UIC program, that it would initiate rulemaking in 2013 to regulate fracking under its UIC program (see December 3, 2012, post).  Ultimately, if DOGGR moves forward with this rulemaking, it could make the Center’s claims moot.

Co-authored by Michael N. Mills and Robin B. Seifried.

Both the Alaska proposed regulations and the DOGGR discussion draft require an evaluation of the ability of the well to withstand fracking operations and the integrity of the well throughout fracking operations. The significant differences between the two proposed rules are:

• Alaska would require pre-approval before conducting fracking activities while DOGGR would not; 
• Alaska would require a more substantial preliminary investigation into the other wells in the area and groundwater monitoring during the fracking operations;
• Alaska would require direct notification to nearby land owners and well operators; and
• Alaska would not provide trade secret protection.

At this stage, the DOGGR regulations are only posed in the form of a “discussion draft” and may be another year away from final. The Alaska regulations will likely go into effect first and may well impact future versions of DOGGR’s proposed regulations.

Initial comments from environmental groups are in support of Alaska’s proposed regulations, again in contrast to initial reactions to DOGGR’s draft discussion rule. The proposed Alaska regulations have been deemed “quite comprehensive” by Mike Paque, Executive Director of the Ground Water Protection Council. Plaque told the Platts news service that the Alaska regulations “go into significant detail on protecting local groundwater or drinking water.”

Co-authored by Ramona L. Monroe, Michael N. Mills, and Robin B. Seifried.